A strategy view on knowledge in the MNE – Integrating Subsidiary Roles and Knowledge Flows1

This paper has been awarded a runners-up best prize at the SPRU 40-th Anniversary Conference, September 2006. Paper is under review wit Research Policy. Please do not cite without permission of author. We assume knowledge inflows endogenous to subsidiary roles. Integrating organisational and knowledge-based views we propose a new subsidiary typology based on MNE integration-subsidiary capability. We hypothesise that both dimensions are positively associated with knowledge inflows into the focal subsidiary. This prediction is tested with data for 425 subsidiaries. The key findings were: (a) the extent for knowledge inflows differs significantly across all subsidiary roles; (b) it diminishes in a anti-clockwise direction starting in the high integration-high capability quadrant of the IC taxonomy; thus (c) both MNE integration and subsidiary capability drive knowledge inflows, although, the balance shifts more towards integration